Mitsubishi Widens Full-Year Loss Forecast Sixfold to $672 Million

Battered by the double whammy of a U.S. sales slump and a load of bad debt from its North American credit operations, Mitsubishi Motors Corp. said Thursday that its fiscal year loss would be $672 million, more than six times what the company forecast just four months ago.

Japan’s fourth-largest automaker also said it expected global sales for the year ending March 31 to fall slightly to $23 billion from the previous estimate of $24 billion.

Sales and lending woes in the U.S., which accounts for a majority of Mitsubishi’s business, have changed its California-based North American operation from a bright star to a black hole that is sucking up all the company’s cash.

Mitsubishi Motors North America enjoyed record growth in the U.S. in 2001 and 2002, but it saw sales plummet last year. The heated incentive wars that lowered auto prices across the board rendered Mitsubishi’s deal-based sales efforts invisible, said Finbarr O’Neill, the North American unit’s chief executive.

Mitsubishi’s U.S. sales were off 26% for all of 2003. And the company started 2004 on a downward slide, with January sales off 33% from a year earlier.

Mitsubishi also has written off almost $800 million in bad loans in North America since late 2001. Some analysts expect the write-offs to top $1 billion when the company reports its financial results.

Yet O’Neill, who was wooed away from Hyundai Motor Corp. last year, said Mitsubishi’s finance company “is starting to come back now

Since joining Mitsubishi in August, O’Neill has shaken up top management ranks in the North American company’s sales and marketing departments, laid off 200 employees at Mitsubishi’s Cypress-based U.S. headquarters and continued to pursue tightened lending policies instituted by his predecessor.

“The stricter lending policies have had a slowing impact on sales,” he acknowledged Thursday. “The challenge now is to get our product story out to the consumers.”

In Japan, analysts were speculating that Mitsubishi’s mounting losses would lead to the resignation this year of company President Rolf Eckrodt, a former DaimlerChrysler executive who was brought in 20 months ago to clean up the company’s problems. DaimlerChrysler owns 37% of Mitsubishi, giving it control of the company under Japanese law.

Eckrodt told reporters in Tokyo on Thursday that without the U.S. lending losses and sales slump, Mitsubishi probably would be able to post a fiscal 2003 profit. The company turned a profit in fiscal 2002 on strong U.S. sales.

Mitsubishi Motors’ U.S. shares closed at $2.40 in over-the-counter trading, down 10 cents.

Separately Thursday, DaimlerChrysler said its U.S.-based Chrysler Group posted fourth-quarter operating profit of $180 million, a gain of 86% over the year-ago period. Sales were up 10% to $15.5 billion.

For the full year, however, Chrysler Group lost $637 million. Sales fell 18% to $62.1 billion.

DaimlerChrysler this month posted consolidated fourth-quarter profit of $1.76 billion, up 328%. The company said losses from its aerospace investments cut its full-year profit by 90% to $546 million.

DaimlerChrysler’s U.S. shares closed down 20 cents at $46.46 in New York Stock Exchange trading.